Press Release

Fentura Financial, Inc. Announces Third Quarter 2019 Earnings

Dollars in thousands except per share amounts. Certain items in the prior period financial statements have been reclassified to conform with September 30, 2019 presentation.

Company Release - 10/24/2019 9:45 AM ET

FENTON, Mich., Oct. 24, 2019 (GLOBE NEWSWIRE) -- Fentura Financial, Inc. (OTCQX: FETM) announces continued strong earnings with net income of $3,415 and $9,026 for the three and nine month periods ended September 30, 2019, respectively.

  • 13.50% increase in gross loans since September 30, 2018
  • 4.50% increase in total deposits since September 30, 2018
  • Year to date yield on interest earning assets increased to 4.81% from 4.58% at September 30, 2018
  • 18.88% increase in tangible book value per share since September 30, 2018

Ronald L. Justice, President and CEO said, “Our strong earnings are built off of our continued growth in net interest income. Even when adjusting for nonrecurring items, net interest income continues to grow quarter after quarter. Our team works diligently to put our customers in the most beneficial financial situation possible. I am extremely proud of the work they do both for Fentura, and, more importantly, the communities that we serve.”

Following is a discussion of the Corporation's financial performance as of, and for the quarter ended, September 30, 2019. At the end of this document is a list of abbreviations and acronyms.

Results of Operations
The following table outlines the Corporation's QTD results of operations and provides certain performance measures as of, and for the three month periods ended:

  9/30/2019 6/30/2019 3/31/2019 12/31/2018 9/30/2018
INCOME STATEMENT DATA          
Interest income $11,240  $10,788  $10,437  $9,931  $9,311 
Interest expense 2,184  2,195  2,090  1,926  1,638 
Net interest income 9,056  8,593  8,347  8,005  7,673 
Provision for loan losses 422  264  213  290  191 
Noninterest income 2,262  2,250  1,522  1,703  2,760 
Noninterest expenses 6,608  6,691  6,509  6,907  6,075 
Federal income tax expense 873  791  633  502  654 
Net income $3,415  $3,097  $2,514  $2,009  $3,513 
PER SHARE          
Earnings $0.73  $0.67  $0.54  $0.46  $0.96 
Dividends $0.07  $0.07  $0.07  $0.06  $0.06 
Tangible book value(1) $20.59  $19.83  $19.15  $18.61  $17.32 
Quoted market value          
High $21.00  $20.90  $21.00  $22.02  $22.50 
Low $20.45  $20.45  $20.05  $20.94  $20.60 
Close(1) $21.00  $20.60  $20.89  $21.00  $21.15 
PERFORMANCE RATIOS          
Return on average assets 1.40% 1.31% 1.09% 0.87% 1.61%
Return on average shareholders' equity 13.83% 13.14% 11.09% 9.87% 21.27%
Return on average tangible shareholders' equity 15.08% 14.36% 12.13% 10.96% 24.27%
Efficiency ratio 58.38% 61.71% 65.95% 71.15% 58.23%
Yield on earning assets (FTE) 4.85% 4.81% 4.77% 4.54% 4.53%
Rate on interest bearing liabilities 1.41% 1.46% 1.40% 1.29% 1.15%
Net interest margin to earning assets (FTE) 3.92% 3.83% 3.82% 3.66% 3.73%
BALANCE SHEET DATA(1)          
Total investment securities $62,351  $73,285  $82,222  $94,721  $79,531 
Gross loans $826,597  $813,547  $809,863  $772,227  $728,302 
Total assets $978,046  $949,790  $946,172  $926,450  $909,901 
Total deposits $801,101  $792,555  $789,533  $763,124  $766,587 
Borrowed funds $69,000  $54,000  $59,000  $69,000  $74,000 
Total shareholders' equity $99,142  $95,504  $92,236  $89,516  $66,340 
Net loans to total deposits 102.51% 102.02% 101.97% 100.60% 94.46%
Common shares outstanding 4,658,722  4,653,343  4,647,978  4,636,455  3,645,402 
QTD BALANCE SHEET AVERAGES          
Total assets $971,074  $947,095  $934,078  $917,242  $866,253 
Earning assets $920,551  $900,738  $887,974  $868,498  $817,110 
Interest bearing liabilities $611,804  $603,965  $604,973  $592,878  $565,908 
Total shareholders' equity $97,958  $94,519  $91,964  $80,781  $65,541 
Total tangible shareholders' equity $89,860  $86,478  $84,025  $72,742  $57,419 
Earned common shares outstanding 4,646,835  4,641,161  4,635,255  4,332,665  3,643,151 
Unvested stock grants 9,967  9,967  9,788  3,022   
Total common shares outstanding 4,656,802  4,651,128  4,645,043  4,335,687  3,643,151 
ASSET QUALITY(1)          
Nonperforming loans to gross loans 0.11% 0.13% 0.15% 0.14% 0.09%
Nonperforming assets to total assets 0.09% 0.11% 0.13% 0.12% 0.09%
ALLL to gross loans 0.65% 0.62% 0.59% 0.58% 0.57%
CAPITAL RATIOS(1)          
Total capital to risk weighted assets 14.42% 14.18% 13.99% 14.00% 11.31%
Tier 1 capital to risk weighted assets 13.73% 13.53% 13.37% 13.40% 10.73%
CET1 capital to risk weighted assets 11.96% 11.73% 11.54% 11.52% 8.77%
Tier 1 leverage ratio 11.22% 11.16% 10.99% 10.92% 8.90%
           
(1)At end of period          


The following table outlines the Corporation's YTD results of operations and provides certain performance measures as of, and for the nine month periods ended:

      Variance
  9/30/2019 9/30/2018  Amount
  %
INCOME STATEMENT DATA        
Interest income $32,465  $26,419  $6,046  22.89%
Interest expense 6,469  3,901  2,568  65.83%
Net interest income 25,996  22,518  3,478  15.45%
Provision for loan losses 899  767  132  17.21%
Noninterest income 6,034  6,574  (540) (8.21)%
Noninterest expenses 19,808  18,403  1,405  7.63%
Federal income tax expense 2,297  1,817  480  26.42%
Net income $9,026  $8,105  $921  11.36%
PER SHARE        
Earnings $1.94  $2.23  $(0.29) (13.00)%
Dividends $0.21  $0.18  $0.03  16.67%
Tangible book value(1) $20.59  $17.32  $3.27  18.88%
Quoted market value        
High $21.00  $21.15  $(0.15) (0.71)%
Low $20.05  $18.88  $1.17  6.20%
Close(1) $21.00  $21.15  $(0.15) (0.71)%
PERFORMANCE RATIOS        
Return on average assets 1.27% 1.32%   (0.05)%
Return on average shareholders' equity 12.73% 17.29%   (4.56)%
Return on average tangible shareholders' equity 13.90% 19.87%   (5.97)%
Efficiency ratio 61.84% 63.26%   (1.42)%
Yield on earning assets (FTE) 4.81% 4.58%   0.23%
Rate on interest bearing liabilities 1.43% 0.99%   0.44%
Net interest margin to earning assets (FTE) 3.85% 3.91%   (0.06)%
BALANCE SHEET DATA(1)        
Total investment securities $62,351  $79,531  $(17,180) (21.60)%
Gross loans $826,597  $728,302  $98,295  13.50%
Total assets $978,046  $909,901  $68,145  7.49%
Total deposits $801,101  $766,587  $34,514  4.50%
Borrowed funds $69,000  $74,000  $(5,000) (6.76)%
Total shareholders' equity $99,142  $66,340  $32,802  49.45%
Net loans to total deposits 102.51% 94.46%   8.05%
Common shares outstanding 4,658,722  3,645,402  1,013,320  27.80%
YTD BALANCE SHEET AVERAGES        
Total assets $950,749  $820,481  $130,268  15.88%
Earning assets $904,590  $772,111  $132,479  17.16%
Interest bearing liabilities $606,912  $528,165  $78,747  14.91%
Total shareholders' equity $94,815  $62,662  $32,153  51.31%
Total tangible shareholders' equity $86,789  $54,547  $32,242  59.11%
Earned common shares outstanding 4,641,084  3,638,123  1,002,961  27.57%
Unvested stock grants 9,907    9,907  N/M 
Total common shares outstanding 4,650,991  3,638,123  1,012,868  27.84%
ASSET QUALITY(1)        
Nonperforming loans to gross loans 0.11% 0.09%   0.02%
Nonperforming assets to total assets 0.09% 0.09%   %
ALLL to gross loans 0.65% 0.57%   0.08%
CAPITAL RATIOS(1)        
Total capital to risk weighted assets 14.42% 11.31%   3.11%
Tier 1 capital to risk weighted assets 13.73% 10.73%   3.00%
CET1 capital to risk weighted assets 11.96% 8.77%   3.19%
Tier 1 leverage ratio 11.22% 8.90%   2.32%
         
(1)At end of period        


Income Statement Breakdown and Analysis

  Quarter to Date
    9/30/2019   6/30/2019 3/31/2019 12/31/2018 9/30/2018
GAAP net income $3,415   $3,097   $2,514   $2,009   $3,513 
           
GAAP net income          
Acquisition related items (net of tax)          
Accretion on purchased loans (189)  (145)  (175)  (167)  (116)
Amortization of core deposit intangible 88   90   89   107   107 
Amortization on acquired time deposits 7   7   7   9   9 
Amortization on purchased MSRs 3   3   3   6   6 
Total acquisition related items (net of tax) (91)  (45)  (76)  (45)  6 
Other nonrecurring items (net of tax)          
Prepayment penalties collected (284)  (9)  (13)     (96)
Net gain from BOLI death benefit             (932)
Total other nonrecurring items (net of tax) (284)  (9)  (13)     (1,028)
  Adjusted net income from operations $3,040   $3,043   $2,425   $1,964   $2,491 
           
           
GAAP net interest income $9,056   $8,593   $8,347   $8,005   $7,673 
Accretion on purchased loans (239)  (183)  (222)  (211)  (147)
Prepayment penalties collected (360)  (12)  (16)     (122)
Amortization on acquired time deposits 9   9   9   12   12 
Adjusted net interest income $8,466   $8,407   $8,118   $7,806   $7,416 
           
           
PERFORMANCE RATIOS          
Based on adjusted net income from operations          
Earnings per share $0.65   $0.66   $0.52   $0.45   $0.68 
Return on average assets 1.24%  1.29%  1.05%  0.85%  1.14%
Return on average shareholders' equity 12.31%  12.91%  10.69%  9.65%  15.08%
Return on average tangible shareholders' equity 13.42%  14.11%  11.70%  10.71%  17.21%
           
Based on adjusted net interest income          
Yield on earning assets (FTE) 4.59%  4.72%  4.66%  4.44%  4.40%
Rate on interest bearing liabilities 1.42%  1.47%  1.41%  1.30%  1.16%
Net interest margin to earning assets (FTE) 3.67%  3.75%  3.72%  3.57%  3.61%


  Year to Date September 30 Variance
  2019 2018 Amount %
GAAP net income $9,026  $8,105  $921  11.36%
Acquisition related items (net of tax)        
Accretion on purchased loans (509) (622) 113  (18.17)%
Amortization of core deposit intangible 267  321  (54) (16.82)%
Amortization on acquired time deposits 21  28  (7) (25.00)%
Amortization on purchased MSRs 9  18  (9) (50.00)%
Total acquisition related items (net of tax) (212) (255) 43  (16.86)%
Other nonrecurring items (net of tax)        
Prepayment penalties collected (306) (137) (169) 123.36%
Net gain from BOLI death benefit   (932) 932  (100.00)%
Total other nonrecurring items (net of tax) (306) (1,069) 763  (71.38)%
  Adjusted net income from operations $8,508  $6,781  $1,727  25.47%
         
GAAP net interest income $25,996  $22,518  $3,478  15.45%
Accretion on purchased loans (644) (787) 143  (18.17)%
Prepayment penalties collected (388) (173) (215) 124.28%
Amortization on acquired time deposits 27  35  (8) (22.86)%
Adjusted net interest income $24,991  $21,593  $3,398  15.74%
         
PERFORMANCE RATIOS        
Based on adjusted net income from operations        
Earnings per share $1.83  $1.86  $(0.03) (1.61)%
Return on average assets 1.20% 1.10%   0.10%
Return on average shareholders' equity 12.00% 14.47%   (2.47)%
Return on average tangible shareholders' equity 13.11% 16.62%   (3.51)%
         
Based on adjusted net interest income        
Yield on earning assets (FTE) 4.66% 4.41%   0.25%
Rate on interest bearing liabilities 1.44% 1.00%   0.44%
Net interest margin to earning assets (FTE) 3.70% 3.75%   (0.05)%

To effectively compare core operating results from period to period, the impact of acquisition related items and other nonrecurring items have been isolated.

As outlined in the preceding tables, the Corporation has been able to generate strong net income and adjusted net income from operations. The Corporation has also been successful at consistently increasing adjusted net interest income. This increase continues to be primarily driven through increases in loans while maintaining relatively healthy interest margins. Through 2019, and into 2020, the Corporation expects to see a continued increase in net interest income. This increase will primarily be driven by loan growth. The Corporation expects net interest margin to earning assets to approximate current levels for the remainder of 2019, and narrow slightly in 2020, due to the forecasted interest rate environment.

Average Balances, Interest Rate, and Net Interest Income

The following tables present the daily average amount outstanding for each major category of interest earning assets, non-earning assets, interest bearing liabilities, and noninterest bearing liabilities. These tables also present an analysis of interest income and interest expense for the periods indicated. All interest income is reported on an FTE basis using a federal income tax rate of 21%. Loans in nonaccrual status, for the purpose of the following computations, are included in the average loan balances.


  Three Months Ended
   September 30, 2019   June 30, 2019   September 30, 2018
   Average
Balance
  Tax
Equivalent
Interest
 Average
Yield /
Rate
  Average
Balance
  Tax
Equivalent
Interest
 Average
Yield /
Rate
  Average
Balance
  Tax
Equivalent
Interest
 Average
Yield /
Rate
Interest earning assets                  
Total loans $827,456  $10,639  5.10% $805,954  $10,141  5.05% $722,811  $8,768  4.81%
Taxable investment securities 58,059  375  2.56% 67,237  462  2.76% 52,617  311  2.34%
Nontaxable investment securities 9,482  72  3.01% 9,374  70  3.00% 11,417  77  2.68%
Federal funds sold 16,546  89  2.13% 10,195  61  2.40% 23,872  120  1.99%
Interest earning cash and cash equivalents 5,858  35  2.37% 4,828  28  2.33% 3,243  15  1.84%
FHLB stock 3,150  45  5.67% 3,150  41  5.22% 3,150  36  4.53%
Total earning assets 920,551  11,255  4.85% 900,738  10,803  4.81% 817,110  9,327  4.53%
                   
Non-earning assets                  
ALLL (5,139)     (4,822)     (4,080)    
Fixed assets 14,942      14,837      14,808     
Accrued income and other assets 40,720      36,342      38,415     
Total assets $971,074      $947,095      $866,253     
                   
Interest bearing liabilities                  
Interest bearing demand deposits $97,572  $229  0.93% $75,496  $117  0.62% $67,368  $65  0.38%
Savings deposits 243,796  282  0.46% 243,794  319  0.52% 235,723  125  0.21%
Time deposits 209,984  1,207  2.28% 229,863  1,319  2.30% 188,817  907  1.91%
Borrowed funds 60,452  451  2.96% 54,812  440  3.22% 74,000  541  2.90%
Total interest bearing liabilities 611,804  2,169  1.41% 603,965  2,195  1.46% 565,908  1,638  1.15%
                   
Noninterest bearing liabilities                  
Noninterest bearing deposits 253,292      243,010      232,153     
Accrued interest and other liabilities 8,020      5,601      2,651     
Shareholders' equity 97,958      94,519      65,541     
Total liabilities and shareholders' equity $971,074      $947,095      $866,253     
Net interest income (FTE)   $9,086      $8,608      $7,689   
Net interest margin to earning assets (FTE)     3.92%     3.83%     3.73%


  Nine Months Ended
  September 30, 2019
 September 30, 2018
  Average
Balance
 Tax
Equivalent
Interest
 Average
Yield /
Rate
 Average
Balance
 Tax
Equivalent
Interest
 Average
Yield /
Rate
Interest earning assets            
Total loans $808,159  $30,521  5.05% $701,791  $25,239  4.81%
Taxable investment securities 68,219  1,396  2.74% 43,273  702  2.17%
Nontaxable investment securities 9,812  218  2.97% 11,957  230  2.57%
Federal funds sold 8,928  150  2.25% 9,656  127  1.76%
Interest earning cash and cash equivalents 6,322  88  1.86% 2,425  47  2.59%
FHLB stock 3,150  138  5.86% 3,009  122  5.42%
Total earning assets 904,590  32,511  4.81% 772,111  26,467  4.58%
             
Non-earning assets            
ALLL (4,851)     (3,836)    
Fixed assets 14,866      14,642     
Accrued income and other assets 36,144      37,564     
Total assets $950,749      $820,481     
             
Interest bearing liabilities            
Interest bearing demand deposits $82,161  $445  0.72% $63,697  $112  0.24%
Savings deposits 243,135  898  0.49% 239,431  372  0.21%
Time deposits 221,903  3,746  2.26% 161,944  2,081  1.72%
Borrowed funds 59,713  1,380  3.09% 63,093  1,336  2.83%
Total interest bearing liabilities 606,912  6,469  1.43% 528,165  3,901  0.99%
             
Noninterest bearing liabilities            
Noninterest bearing deposits 243,523      226,955     
Accrued interest and other liabilities 5,499      2,699     
Shareholders' equity 94,815      62,662     
Total liabilities and shareholders' equity $950,749      $820,481     
Net interest income (FTE)   $26,042      $22,566   
Net interest margin to earning assets (FTE)     3.85%     3.91%

Net Interest Income

Net interest income is the amount by which interest income on earning assets exceeds the interest expenses on interest bearing liabilities. Net interest income, which includes loan fees, is influenced by changes in the balance and mix of assets and liabilities and market interest rates. The Corporation exerts some control over these factors; however, FRB monetary policy and competition have a significant impact. For analytical purposes, net interest income is adjusted to an FTE basis by adding the income tax savings from interest on tax exempt loans, and nontaxable investment securities, thus making year to year comparisons more meaningful.

Volume and Rate Variance Analysis

The following table sets forth the effect of volume and rate changes on interest income and expense for the periods indicated. For the purpose of this table, changes in interest due to volume and rate were determined as follows:

Volume - change in volume multiplied by the previous period's rate.
Rate - change in the FTE rate multiplied by the previous period's volume.

The change in interest due to both volume and rate has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.

  Three Months Ended Three Months Ended Nine Months Ended 
  September 30, 2019 September 30, 2019 September 30, 2019 
  Compared To Compared To Compared To 
  June 30, 2019 September 30, 2018 September 30, 2018 
  Increase (Decrease) Due to Increase (Decrease) Due to Increase (Decrease) Due to 
   Volume  Rate Net  Volume  Rate Net  Volume  Rate Net 
Changes in interest income                   
Total loans $363  $135  $498  $1,321  $550  $1,871  $1,308  $3,974  $5,282  
Taxable investment securities (57) (30) (87) 33  31  64  218  476  694  
Nontaxable investment securities 2    2  (47) 42  (5) 46  (58) (12) 
Federal funds sold 71  (43) 28  (79) 48  (31) 38  (15) 23  
Interest earning cash and cash equivalents 6  1  7  15  5  20  (24) 65  41  
FHLB stock   4  4    9  9  10  6  16  
Total changes in interest income 385  67  452  1,243  685  1,928  1,596  4,448  6,044  
                    
Changes in interest expense                   
Interest bearing demand deposits 41  71  112  39  125  164  42  291  333  
Savings deposits   (37) (37) 4  153  157  6  520  526  
Time deposits (102) (10) (112) 110  190  300  901  764  1,665  
Borrowed funds 166  (155) 11  (160) 70  (90) (105) 149  44  
Total changes in interest expense 105  (131) (26) (7) 538  531  844  1,724  2,568  
Net change in net interest income (FTE) $280  $198  $478  $1,250  $147  $1,397  $752  $2,724  $3,476  
                                      


  Average Yield/Rate for the Three Month Periods Ended
  9/30/2019 6/30/2019 3/31/2019 12/31/2018 9/30/2018
Total earning assets 4.85% 4.81% 4.77% 4.54% 4.53%
Total interest bearing liabilities 1.41% 1.46% 1.40% 1.29% 1.15%
Net interest margin to earning assets (FTE) 3.92% 3.83% 3.82% 3.66% 3.73%


  Quarter to Date Net Interest Income (FTE) 
  9/30/2019 6/30/2019 3/31/2019 12/31/2018 9/30/2018 
Total interest income (FTE) 11,255  10,803  10,453  9,947  9,327  
Total interest expense 2,169  2,195  2,090  1,926  1,638  
Net interest income (FTE) $9,086  $8,608  $8,363  $8,021  $7,689  

As outlined in the previous tables, the Corporation has increased net interest income primarily through increases in volume. Net interest margins are expected to approximate current levels for the remainder of the year and shrink slightly in 2020. The anticipated minor reduction in net interest margins for 2020 is due to yields on earning assets falling faster than rates on interest bearing liabilities.

Noninterest Income

  Quarter to Date 
  9/30/2019 6/30/2019 3/31/2019 12/31/2018 9/30/2018 
Net gain on sales of mortgage loans $665  $422  $195  $162  $277  
ATM and debit card income 418  404  360  397  386  
Trust and investment services 395  459  328  372  444  
Mortgage servicing fees 243  230  211  208  199  
Service charges on deposit accounts 239  222  234  259  273  
Net MSR income 142  344  8  67  133  
Net gain from BOLI death benefit         932  
Net gain on sales of commercial loans           
Other income and fees 160  169  186  238  116  
Total noninterest income $2,262  $2,250  $1,522  $1,703  $2,760  


  Year to Date September 30 Variance 
  2019 2018 Amount % 
Net gain on sales of mortgage loans $1,282  $679  $603  88.81% 
ATM and debit card income 1,182  1,128  54  4.79% 
Trust and investment services 1,182  1,219  (37) (3.04)% 
Mortgage servicing fees 684  577  107  18.54% 
Service charges on deposit accounts 695  785  (90) (11.46)% 
Net MSR income 494  296  198  66.89% 
Net gain from BOLI death benefit   932  (932) (100.00)% 
Net gain on sales of commercial loans   518  (518) (100.00)% 
Other income and fees 515  440  75  17.05% 
Total noninterest income $6,034  $6,574  $(540) (8.21)% 

Net gain on sales of mortgage loans represents the income earned on the sale of residential mortgage loans into the secondary market. Through the first nine months of 2019, the Corporation had two sales of residential mortgage pools that were previously held in its loan portfolio. One sale occurred in the second quarter of 2019 in which $28,000 of residential mortgages generated a gain of $25. The second sale occurred in the third quarter of 2019, in which $2,600 of residential mortgages generated a gain of $64. In 2018, the Corporation had one sale of residential mortgages that were previously held in its portfolio. The sale generated a gain of $47 and $4,724 of residential mortgages were sold. Excluding the impact of these sales, net gains from the sales of mortgage loans increased by $561 when the first nine months of 2019 are compared to the same period in 2018 and this trend is expected to continue throughout the remainder of the year. While the Corporation  continually analyzes its residential mortgage portfolio for opportunistic sales strategies, there are no sales anticipated in the foreseeable future.

ATM and debit card income represents fees earned on ATM and debit card transactions. The Corporation expects these fees to increase modestly in future periods.

Trust and investment services include income the Corporation earns from its contracts with customers to manage assets for investment, and/or to transact on their accounts. The wealth management component is strongly correlated to changes in the stock market and as such, can vary from period to period. Trust and investment services income activity is expected to approximate current levels for the foreseeable future.

Mortgage servicing fees include the fees earned for servicing loans that have been sold into the secondary market. The increase in mortgage servicing fees is directly related to the increases in the size of the serviced portfolio. Mortgage servicing fees are expected to continue to increase as mortgage demand remains strong.

Service charges on deposit accounts include fees earned from the Corporation's deposit customers for transaction-based, account maintenance and overdraft services. The decrease in service charges on deposit accounts is a result of declines in NSF fees as well as a shift of customer demand toward deposit accounts with no or reduced service charges. Service charges on deposit accounts are expected to approximate current levels for the foreseeable future.

Net MSR income is the net of income generated from the capitalization of new MSRs and the amortization of serviced loans as a result of paydowns and payoffs. As noted above, the Corporation sold pools of residential mortgage loans out of its loan portfolio in the second and third quarter of 2019. This second quarter sale generated $266 of net MSR income from the capitalization of the associated servicing rights while the third quarter sale generated $25 of capitalized servicing rights. The Corporation expects net MSR income to stabilize in future periods as residential mortgage sales continue at current levels for the foreseeable future.

Net gain from BOLI death benefit is recognized in the event of the death of an insured individual. The Corporation does not expect to receive any gains from BOLI death benefits in 2019.

Net gain on sales of commercial loans includes the income earned on the sale of commercial loans into the secondary market. There were no sales for the nine months ending September 30, 2019. While the Corporation  continually analyzes its commercial loan portfolio for opportunistic sales strategies, there are no sales anticipated in the foreseeable future.

Other income and fees include other income items, none of which are individually significant. Other income and fees are expected to approximate current levels for the for the foreseeable future.

Noninterest Expenses

  Quarter to Date
  9/30/2019 6/30/2019 3/31/2019 12/31/2018 9/30/2018
Compensation $3,530  $3,749  $3,630  $3,429  $3,359 
Furniture and equipment 579  525  491  508  486 
Professional services 494  439  445  518  381 
Occupancy 444  426  437  416  379 
Data processing 323  281  278  512  164 
Advertising and promotional 222  291  163  198  177 
Loan and collection 120  119  110  134  135 
Amortization of CDI 112  114  112  136  135 
Telephone and communication 110  108  111  107  106 
ATM and debit card 109  100  95  96  105 
FDIC insurance premiums 20  17  101  120  132 
Other losses 13  4  11  152  2 
Other general and administrative 532  518  525  581  514 
Total noninterest expenses $6,608  $6,691  $6,509  $6,907  $6,075 


  Year to Date September 30 Variance
  2019 2018 Amount %
Compensation $10,909  $9,992  $917  9.18%
Furniture and equipment 1,595  1,390  205  14.75%
Professional services 1,378  1,269  109  8.59%
Occupancy 1,307  1,223  84  6.87%
Data processing 882  456  426  93.42%
Advertising and promotional 676  520  156  30.00%
Loan and collection 349  403  (54) (13.40)%
Amortization of CDI 338  406  (68) (16.75)%
Telephone and communication 329  306  23  7.52%
ATM and debit card 304  291  13  4.47%
FDIC insurance premiums 138  352  (214) (60.80)%
Other losses 28  261  (233) (89.27)%
Other general and administrative 1,575  1,534  41  2.67%
Total noninterest expenses $19,808  $18,403  $1,405  7.63%

Compensation includes all compensation and benefits paid to the Corporation's employees. Compensation for the nine months ending September 30, 2019 has increased compared to the same time period for 2018, and is expected to continue to increase, due to the continued growth in size and complexity of the organization.

Furniture and equipment and occupancy expenses primarily consist of depreciation, repairs and maintenance, property taxes, utilities, insurance, and other related items. These expenses are expected to approximate current levels throughout the remainder of the year.

Professional services include expenses relating to third-party professional services. These services include, but are not limited to, regulatory, auditing, consulting, and legal. These expenses are expected to approximate their current levels for the remainder of the year.

Data processing primarily includes the expenses relating to the Corporation's core data processor. The increase is largely due to the growth in size and complexity of the organization. These expenses are expected to approximate current levels throughout the remainder of the year.

Advertising and promotional includes the Corporation's media costs and any donations or sponsorships made on behalf of the Corporation. The increase in expenses is a direct result of the Corporation enhancing its marketing efforts to attract new and expand existing customer loans and deposit accounts. These expenses are expected to approximate current levels throughout the remainder of the year.

Loan and collection includes expenses related to the origination and collection of loans, as well as expenses related to OREO. The Corporation does not expect any significant fluctuations in 2019.

Amortization of CDI relates to the core deposits acquired from Community Bancorp, Inc. on December 31, 2016 and is expected to approximate current levels for the remainder of 2019.

Telephone and communication includes expenses relating to the Corporation's communication systems. These expenses have increased due to the growth in size and complexity of the organization and are expected to approximate current levels for the remainder of the year.

ATM and debit card expenses fluctuate based on customer and non-customer utilization of ATMs and customer debit card volumes. The Corporation expects these fees to increase modestly throughout 2019.

FDIC insurance premiums typically fluctuate based on the size of the Corporation's balance sheet, capital position, overall risk profile, and examination ratings. FDIC insurance premiums are expected to remain at current levels for 2019.

Included in other losses was a $260 one time loan related expense in the first quarter of 2018 and one time loss totaling $132 in the fourth quarter of 2018 related to assets acquired from Community Bancorp, Inc. Excluding these isolated items, other losses have not been significant and management does not anticipate any significant other losses in 2019.

Other general and administrative includes miscellaneous other expense items, none of which are individually significant. These expenses are expected to approximate current levels for the reminder of the year.

Balance Sheet Breakdown and Analysis

  9/30/2019 6/30/2019 3/31/2019 12/31/2018 9/30/2018 
ASSETS           
Cash and cash equivalents $37,572  $20,067  $16,509  $23,412  $63,469  
Total investment securities 62,351  73,285  82,222  94,721  79,531  
Loans HFS 15,111  6,771  1,835  903  2,021  
Gross loans 826,597  813,547  809,863  772,227  728,302  
Less ALLL 5,413  5,014  4,745  4,488  4,146  
Net loans 821,184  808,533  805,118  767,739  724,156  
All other assets 41,828  41,134  40,488  39,675  40,724  
Total assets $978,046  $949,790  $946,172  $926,450  $909,901  
            
LIABILITIES AND SHAREHOLDERS' EQUITY           
Total deposits $801,101  $792,555  $789,533  $763,124  $766,587  
Total borrowed funds 69,000  54,000  59,000  69,000  74,000  
Accrued interest and other liabilities 8,803  7,731  5,403  4,810  2,974  
Total liabilities 878,904  854,286  853,936  836,934  843,561  
            
Total shareholders' equity 99,142  95,504  92,236  89,516  66,340  
Total liabilities and shareholders' equity $978,046  $949,790  $946,172  $926,450  $909,901  
                      
                      


  9/30/2019 vs 6/30/2019 9/30/2019 vs 9/30/2018 
  Variance Variance 
  Amount % Amount % 
ASSETS         
Cash and cash equivalents $17,505  87.23% $(25,897) (40.80)% 
Total investment securities (10,934) (14.92)% (17,180) (21.6